I'm currently working for an employer who contributes to my health insurance plan (they pay the plan directly, rather than reimburse me). I've just received my W-2, where it looks like they've included their contributions as part of my taxable income (as well as reporting them in line 12a).

My impression is that such contributions should be pre-tax, however. When I asked about this, I was told that I'm not considered an "employee" for tax purposes. Is this fact relevant? Or should the contributions indeed be pre-tax whether or not I am an employee for tax purposes? Can someone point me to the relevant place in the IRS code? Section 106 seems to be relevant but uses the word "employee" all over.

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    If you received a W-2 from them that strongly implies you are an employee not a contractor. Contractors are typically not issued W-2s, but 1099s instead. What language does the offer letter you signed when you got the job use? – Craine Feb 3 '16 at 3:15
  • @Craine: Well, personally I agree that I should be classified as an employee. And in fact my offer letter does use the word employee, though it does not explicitly specify that my health benefits should be pretax. But my employer is being entirely unhelpful and refusing to modify the W-2... – Daniel Litt Feb 3 '16 at 4:04
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    @DanielLitt Your agreement or offer letter are both irrelevant. The fact that your employer gave you a W-2 means that you're an employee. Had the employer given you a 1099 - it would still not necessarily mean that you're not an employee. – littleadv Feb 3 '16 at 6:05

If you received W-2 than you are considered employee and this should have been pre-tax. You should also see the FICA tax deductions, etc. The amounts on line 12 should have DD code.

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  • Also the pay stubs during the year would have had deductions for state tax, federal tax, FICA. Items like health insurance would have noted if they were pre-tax or post-tax. – mhoran_psprep Feb 3 '16 at 10:35

Even if you are an employee, insurance plan payroll deductions are not always pre-tax. My company's insurance plan payroll deductions were post-tax for many years before they made it pre-tax. Many employees asked about this and they said they had not done the necessary steps to make it pre-tax. They had to prepare certain documents to make the plan satisfy the requirements of a "cafeteria plan" under IRC Section 125 before they could make it pre-tax. This is something you have no control over.

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    but... that's not the explanation they gave... – littleadv Feb 3 '16 at 7:33

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